Perspectives on Economics & Society

Nudges, individual behavior and neoliberalism

The concept of nudge became popular after the publication of the 2008 book Nudge: Improving decisions about health, wealth, and happiness, written by Cass Sunstein and the most recent Nobel Laureate, Richard Thaler. According to the authors, nudge refers to “any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not” (Thaler and Sunstein, 2008).

In a previous paper, Thaler and Sunstien (2003) highlighted the paternalistic intention and the libertarian tone that overwhelm the concept. As a result, while policymakers shape contexts of individual choice towards optimal policy goals, individuals are free to choose.

Currently, nudges are used to foster social policy goals, such as the so called consumer protection. The aim of the nudge approach is both to test non-coercive alternatives to traditional regulation and to enhance cooperation between the public and the private sector. Indeed, after 2008, a Behavioural Insights Team (BIT) was created in the UK and in many others countries – like Australia, Canada, the Netherlands, Germany, U.S. and Qatar. Since 2010, the Behavioural Insights Team (BIT) in the UK has been exploring and testing policy options by means of randomised controlled trials (RCTs). Taking into account the American experience, the Obama’s administration stimulated the introduction of nudges in new regulations to generate welfare with cost effectiveness.

Considering this background, the relevant question is: which are the reasons that explain the increasing acceptance of the nudge approach to public policy?

First, the use of nudges in public policy seems to be associated to the broader processes of deregulation and privatization in the context of financialization.

Second, the focus on individual behaviour is consistent with a neoliberal agenda where the new approach to public policy enhances the illusion of free individual choice. In this respect, Ramsey (2012) highlights the real burden on individuals that actually result from labor market flexibility and increasing indebtedness. In his own words: “Deregulation and privatisation often imposed greater choices on individuals (e.g. pensions). Forced to make choices, individuals were invited to regulate themselves according to particular norms of behaviour. Thus in consumer finance markets individuals must learn the appropriate norms of credit and savings behaviour and become financially literate. More recently insights from behavioural economics have been harnessed to ‘nudge’ individuals to change their behaviour”

Third, behind the partnerships between the public and the private sectors that aim at developing new forms of non-coercive regulations, there is, in truth, a set of economic and political interrelations that shape the financialization of corporate strategies in sectors that used to be related to public services. For example, in relation to the health sector, Maryon-Davis (2016) addresses: “Today’s most liberal governments tend to resist calls for regulatory approaches to health behaviour. They are averse to regulating industries such as the tobacco, alcohol and food industries for fear of interfering with companies’ rights to sell their legal products and their legal obligation to shareholders to maximise profits. They tend to be even more reluctant to pass laws directly curtailing the personal freedoms and behaviour of individuals.”

Following the nudge approach, the responsibility for public welfare is shifted to individuals. In spite of encouraging active civic engagement, this approach to public policies seems to neglect the social constraints that restrain individual autonomy. Finally, it is worth noting that, while putting emphasis on individual behaviors and choices, the nudge approach dismisses the global increasing economic, social and political challenges at national, state and local levels.

Would something like the individual mandate in the United States healthcare system then be seen as a departure from the typical reliance on nudges and free market choice? Or rather could it be seen as a “strong” nudge?

First, individuals don’t choose, can’t choose until the individual is culturally defined. This means simply that humans are not individuals until the cultures in which they reside establish what and how individuals exist. Since these are culturally established standards created via certain historical processes, they can and do change over time along with other cultural changes. Humans always choose within some specific milieu of culture and time. Second, Thaler and Sunstein have not invented something new. Ivan Pavlov was one of the first to demonstrate the existence of what came to be called Classical conditioning. Classical conditioning (also known as Pavlovian or respondent conditioning) refers to learning procedure in which a biologically potent stimulus (e.g. food) is paired with a previously neutral stimulus (e.g. a bell) to form a relationship between the potent stimulus and the neutral stimulus. A more effective form of conditioning is called forward (operant) conditioning. During forward conditioning, the onset of the conditioned stimulus precedes the onset of the unconditioned stimulus to signal that the unconditioned stimulus will follow. Hans Eysenck made this form of conditioning famous during the Cold War. And, B.F. Skinner pioneered use of forward conditioning in schools, workplaces, and in therapy. Thaler and Sunstein merely duplicate the work of many psychologists and social psychologists before them. Thaler and Sunstein do propose to utilize forward (or operant) conditioning in broader and more diverse circumstances than most psychologists. This raises concerns since in large and complex situations conditioning at times does not create the expected results. In such situations conditioning’s results may even be opposite of what is sought.